Honors Theses
Date of Award
2012
Document Type
Undergraduate Thesis
Department
Accountancy
First Advisor
Kendall Bowlin
Relational Format
Dissertation/Thesis
Abstract
The Public Company Accounting Oversight Board [PCAOB] is charged with inspecting both individual public company audits as well as audit firm quality control systems. PCAOB inspection reports include information on deficiencies in dividual audits as well as quality control system defects. However, portions of the reports describing any quality control system defects are not made unless the firm does not correct those deficiencies withm one year. 1 classify in inspection public each firm as Type 1, Type 2 or Type 3. Type 1 firms are those whose quality control defects were uncorrected and therefore disclosed after the allotted year, those that had control system defects and corrected those defects system Type 2 firms are within the year. Type 3 firms never had quality control system defects. As the quality control system defects for Type 2 firms are not made public, subtle wording differences in Part B of PCAOB inspection reports allow a reader to distinguish between Type 2 and Type 3 firms as inspection reports for Type 3 firms explicitly state that the inspection team identified no quality control system defects. This study explores the characteristics of audit firms that have quality control system defects and the determinants of whether those firms resolve their quality control system defects within the allotted year. I examine these questions based on data hand-collected from publicly available PCAOB inspection reports. I find that variables indicative of firm size, particularly number of partners, may be positively associated with the tendency to correct quality control system defects in a timely manner. Also, I find that firms with more issuer clients scaled by proxies for firm less likely to correct their quality control system defects. Similarly, I find that firms with only one partner may be less likely to correct their quality control system defects. Finally, my results show that firms who provide written responses size are to PCAOB inspection reports are more likely to fi x their quality control system the allotted year. These findings are important because there has been little research on the inspection reports of triennially-inspected firms (audit firms defects. defects in with 100 or fewer issuer clients), particularly on the quality control system Because PCAOB inspection reports are more opaque than the Peer Review reports they replaced, it is important for users to be aware of potential relationships between firm characteristics and whether or not that firm corrects its quality control system defects. Further, it is important that the PCAOB understand w inspections are likely to prompt improvements in quality.
Recommended Citation
Jackson, Robin Anne, "Examination of the Determinants of Whether Registered Auditing Firms Correct Their Quality Control System Defects Identified in PCAOB Inspection Reports" (2012). Honors Theses. 2038.
https://egrove.olemiss.edu/hon_thesis/2038
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